IFM11 TB Ch26
CHAPTER 26
MERGERS, LBOs, DIVESTITURES, AND HOLDING COMPANIES
Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject lines.
True/False
Easy:
(26.1) Synergistic merger FU Answer: a EASY
1. In a merger with true synergies, the post-merger value exceeds the sum of the separate companies' pre-merger values.
a. True
b. False
(26.1) Sources of synergy FU Answer: a EASY
2. Synergistic benefits can arise from a number of different sources, including operating economies of scale, financial economies, and increased managerial efficiency.
a. True
b. False
(26.1) Spin-off FU Answer: b EASY
3. A spin-off is a type of divestiture in which the assets of a division are sold to another firm.
a. True
b. False
(26.2) Conglomerate merger FU Answer: b EASY
4. A conglomerate merger occurs when two firms with either a horizontal or a vertical business relationship combine.
a. True
b. False
(26.3) Mergers and interest rates FU Answer: b EASY
5. Merger activity is likely to heat up when interest rates are high because target firms can expect to receive an especially high premium over the pre-announcement stock price.
a. True
b. False
(26.4) Defensive mergers FU Answer: b EASY
6. Most defensive mergers occur as a result of managers' actions to maximize shareholders’ wealth.
a. True
b. False
(26.4) Merger terms FU Answer: a EASY
7. Post-merger control and the negotiated price paid by the acquirer are 2 of the most important issues in agreeing on the terms of a merger.
a. True
b. False
(26.4) Defensive tactics FU Answer: a EASY
8. A company seeking to fight off a hostile takeover might employ the services of an investment banking firm to develop a defensive strategy.
a. True
b. False
(26.6) Merger analysis FU Answer: a EASY
9. Since the primary rationale for any operating merger is synergy, in planning such mergers,
MERGERS, LBOs, DIVESTITURES, AND HOLDING COMPANIES
Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject lines.
True/False
Easy:
(26.1) Synergistic merger FU Answer: a EASY
1. In a merger with true synergies, the post-merger value exceeds the sum of the separate companies' pre-merger values.
a. True
b. False
(26.1) Sources of synergy FU Answer: a EASY
2. Synergistic benefits can arise from a number of different sources, including operating economies of scale, financial economies, and increased managerial efficiency.
a. True
b. False
(26.1) Spin-off FU Answer: b EASY
3. A spin-off is a type of divestiture in which the assets of a division are sold to another firm.
a. True
b. False
(26.2) Conglomerate merger FU Answer: b EASY
4. A conglomerate merger occurs when two firms with either a horizontal or a vertical business relationship combine.
a. True
b. False
(26.3) Mergers and interest rates FU Answer: b EASY
5. Merger activity is likely to heat up when interest rates are high because target firms can expect to receive an especially high premium over the pre-announcement stock price.
a. True
b. False
(26.4) Defensive mergers FU Answer: b EASY
6. Most defensive mergers occur as a result of managers' actions to maximize shareholders’ wealth.
a. True
b. False
(26.4) Merger terms FU Answer: a EASY
7. Post-merger control and the negotiated price paid by the acquirer are 2 of the most important issues in agreeing on the terms of a merger.
a. True
b. False
(26.4) Defensive tactics FU Answer: a EASY
8. A company seeking to fight off a hostile takeover might employ the services of an investment banking firm to develop a defensive strategy.
a. True
b. False
(26.6) Merger analysis FU Answer: a EASY
9. Since the primary rationale for any operating merger is synergy, in planning such mergers,